Yeah, the frame is too small. My inseam is 32-33 inches and I like to have 32" from the bottom bracket to the top of the seat. If I was shopping for a new bike at a shop I would get a L or maybe even an XL frame. When you buy used and local, your choices are limited. This was the first decent cheap bike I've seen locally in 2-3 months. If I wanted a Walmart mountain bike for less than $100, I would have had a dozen to pick from.
However, I think I have workable solution. The stock seat is basically a flat road seat. I put on a sprung cruiser saddle and gained another inch from that. I then lowered the seat post an inch and a half so I'm only 1.5 inches over the "min" insert line. At 175 pounds, I'm willing to live with that, about 2/3rds of the seat post is in the bike. With that I've got 31" crank to seat, not my sweet spot but pretty close.
I put some new brake pads and Specialed Fat Boys (26 x 1.25) on this morning and did 4 miles averaging 16mph without too much effort. Gears are a bit gummed-up, slipped in second on the way back so I'll have to work on that but I'm pretty satisfied with my sub-$200 investment (including brake pads and tires) so far.